Boeing Co. (BA) will sell 50 737 aircraft worth at least $3.8 billion to a low-cost carrier being set up by China’s Juneyao Airlines Co., as a loosening of government controls on low-cost travel stokes demand expectations.
The order by Juneyao’s 9 Air subsidiary will include next-generation models of the 737 and 737 Max, Chicago-based Boeing said in an e-mailed statement. Members of the 737 family sell for between $76 million and $109.9 million, according to Boeing list prices, putting a price tag of between $3.8 billion and $5.5 billion on the order. Manufacturers typically give discounts on list prices.
Carriers including Qantas Airways Ltd. (QAN) and China Eastern Airlines Corp. are investing in low-cost aviation in the world’s most populous nation, which Airbus Group NV predicts will overtake the U.S. as the largest aircraft market by 2032. The country’s Civil Aviation Administration in February said it would loosen regulations and study tax breaks to encourage budget carriers, while China Eastern in March ordered 70 Airbus A320s worth about $6.4 billion.
“The low-cost carrier environment is getting increasingly friendlier,” Patrick Xu, a transportation and infrastructure analyst at Barclays in Hong Kong, said in a phone interview. “We are starting to see more start ups.”
Executives at 9 Air couldn’t be reached for comment.
Economic growth is helping make air travel affordable to more Chinese, increasing demand for planes from carriers such as Air China Ltd. (1055) and China Southern Airlines Co.
Boeing will deliver about 140 aircraft to China this year, after handing over a record 143 planes last year, Marc Allen, the aircraft maker’s China president, said in January. Boeing, which delivered a record 648 jets worldwide, secured orders for more than 230 new aircraft from the country last year, he said.
Boeing shares rose 0.6 percent to $133.45 yesterday, paring its decline this year to 2.2 percent. The stock had surged 81 percent last year.
Carriers have taken advantage of low-cost financing to replace older models with newer, more efficient jets. Boeing’s 1,355 net orders for 2013 was the second-highest annual sales tally, and an increase from the 1,338 a year earlier.
Guangzhou-based China Southern, Asia’s biggest airline by passenger numbers, took deliveries of 37 aircraft last year, according to Boeing’s website. That was the second-most among carriers worldwide, lagging behind only American Airlines’s 39, according to the website.